With $USO breaking out higher like I thought it would, where is the top? Where does this rally stop?
I wrote about the looming $USO spike here: http://www.optionmillionaires.com/2013/uso-oil-spike-coming/
The calls I highlighted there are up over 300%.
I think this rally has two possible points of interest to the upside and I think it will, in all likelihood, not get past the first. $USO at higher prices is not good for the consumer, it is not good for the economy, and with rates rising, I can't see oil going much further to the upside without severe consequences for the economy.
Here are two charts I put together. The first chart is from earlier this week and illustrates where I saw $USO headed short term. The next chart represents where I see support and resistance going forward. The dotted line is where I expect the rally for $USO to stop and the solid line is where $USO will head if all the stars align perfectly.
A war in the Middle East will spur panic buying. When that subsides $USO will be below where it trades today. But for now it offers a great opportunity.